Vodacom Profit Gains 23% as Smartphones Boost Data Revenue

Vodacom Group Ltd. (VOD), South Africa’s largest wireless operator, said full-year profit increased 23 percent as more of its customers bought smartphones, driving data service use amid a decline in its largest voice market.

Earnings per share after one-time items rose to 8.72 rand in the 12 months through March from 7.09 rand a year earlier, the Johannesburg-based company said in a statement today. That compares with the range of 8.51 rand to 8.86 rand forecast by the company on April 24.

“We will always provide the mobile voice part but data will become a more substantial part of our revenue,” Chief Executive Officer Shameel Joosub said on a conference call. “We’ll be driving data adoption a lot harder to offset any pricing transformation that we go through on voice.”

Vodacom, which is 65 percent-owned by Vodafone Group Plc (VOD), said it would pay a total dividend of 7.85 rand, an increase of 11 percent on last year. The company is becoming increasingly important for its Newbury, England-based parent as Vodafone struggles to halt a slide in its European business. Vodacom surpassed Vodafone’s U.K. unit in terms of profit in 2010, and outpaced the Spanish division the following year.

Smartphone Demand

Vodacom shares slipped 0.5 percent to 115.21 rand at 9:18 a.m. in Johannesburg, valuing the company at 171.4 billion rand ($18.2 billion). The stock has declined 8 percent this year, compared with a 5.5 percent increase on FTSE/JSE Africa All Share Index.

Vodacom expanded its data services revenue by 22 percent to 10 billion rand, with increased demand for smartphones driving sales. Its customer base rose to 51.7 million from 47.8 million a year earlier, as the company added more than two million customers in the Democratic Republic of Congo.

BlackBerry is the dominant smartphone with around 50 percent market share in South Africa, according to Joosub.

“That will change over time, you’ll see more Android devices coming into the market,” he said on the call. “If Apple decides to come out with a more medium type of phone, then you could see them picking up a lot more market share. We’ve been working on introducing cheaper devices so that we can increase the uptake.”

The company is actively seeking acquisitions in Africa, Joosub said. Vodacom is in talks to acquire Tata Communication Ltd.’s Neotel unit, according to a person familiar with the negotiations.

Revenue in South Africa, its largest market, grew 2.9 percent to 58.6 billion rand on improved sales of smartphones and tablets. Its domestic voice revenue fell 0.8 percent to 29.2 billion rand while mobile messaging retreated 3.7 percent to 3 billion rand.

“In South Africa, poor performance among independent service providers, persistent economic weakness and on-going cuts in mobile termination rates hampered service revenue growth,” Joosub said in the statement.

To contact the reporter on this story: Chris Spillane in Johannesburg at cspillane3@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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